Congress is in the process of fixing how the US tax code handles crypto mining and staking rewards, and for validators and their institutional clients, the fix is long overdue.
H.R. 9175, the Tax Clarity for Mining and Staking Act, would let miners and stakers defer taxes on newly minted tokens until they sell them, ending a cash flow penalty that has pushed the validation infrastructure and its largest customers to offshore jurisdictions with clearer rules.
For Bitcoin miners, the bill barely touches the actual competition, consisting of the availability of land, power contracts, permit periods and network reliability, which determine where the next megawatt is built.
The strike tax problem
According to IRS Revenue Ruling 2023-14, validators and their customers owe ordinary income taxes on wagering rewards at the time they are received, at that day’s price, regardless of whether or not they have sold a single token.
In staking-as-a-service models, where institutional clients delegate tokens to a validator while those tokens are locked during a bonding period, the client owes a cash tax bill on assets they cannot yet liquidate. The infrastructure provider owes taxes on the commission it collected on those same illiquid tokens.
Jennie Levin, Chief Legal and Operating Officer at the Algorand Foundation and former staking-as-a-service operator, calls this “a constant cash drag” where every reward on every network must be valued at the time of receipt. If the price drops before someone can sell, liability is already set at the higher number.
That position hardened on June 4, when the US Tax Court issued its first opinion directly addressing the taxation of strike pay. In Paschall v. Commissioner, TC Memo. In 2026-46, the court held that remuneration constitutes gross income under section 61 when the taxpayer is given dominion and control over it.
The ruling has no precedent, and Jarrett v. United States and other pending cases could further complicate matters, but the ruling came just as Congress is deciding whether to legislate another response.
HR 9175 allows taxpayers to treat newly minted tokens as self-created property, deferring recognition until they are made available.
The Blockchain Association, Crypto Council for Innovation, and The Digital Chamber have backed it as a “balanced compromise” that maintains ordinary income classification while eliminating the tax-before-liquidity penalty that drives infrastructure staking offshore.
If successful, institutional clients could build US-based validators without treating every rewards cycle as a potential cash flow crisis, a change that becomes most valuable when prices rise and phantom tax liabilities on locked tokens are at their greatest.
Switzerland and Singapore have already moved to offer clearer treatment, and as a result they are pushing institutional matters to the margins.
Levin noted where the bill’s reach ends:
“The tax bill transforms the US from punitive to viable; clarity on securities and custody is what makes the country competitive.”
The SEC’s Division of Corporation Finance issued a statement in May 2025 noting that certain protocol staking activities do not involve the offering of securities, and the agency in January 2025 rescinded SAB 121, which required companies that hold digital assets to record them as liabilities on their own balance sheets.
Both measures reduced friction, and both remain staff-level guidelines that a future Commission could roll back without rulemaking, leaving securities classification, custody rules, and licensing as barriers between a viable U.S. validation industry and one that is truly competitive.
Bitcoin mining follows the infrastructure
President Donald Trump’s campaign promise of “Bitcoin made in America” became a reality: Executives deployed capacity building in places where power is cheap, land is permitted and electricity contracts are valid for ten years.
The US held approximately 37.5% of the global Bitcoin hashrate as of January 2026, the largest national share, while Paraguay grew 54% year-on-year to 4.3%, Ethiopia climbed to 2.5% and eighth globally, and CoinShares expects the network to reach 1.8 ZH/s by the end of 2026, with Paraguay, Ethiopia and Oman all in the global top ten.
HIVE Digital Technologies operates at high capacity in Canada, Sweden, Paraguay and the US, and CEO Aydin Kilic noted that the first question is whether HIVE owns the land and can execute efficiently on site, then customer demand, then long-term power availability and economics.
Regarding US competitiveness specifically, Kilic pointed to the efficiency of permitting and zoning, reliable electricity contracts at scale and attractive prices, and long-term certainty. The company’s Yguazú campus in Paraguay achieved 300 MW of ANDE power agreements because land and utility relationships were already in place.
In Sweden, HIVE signed a non-binding LOI for a potential lease of up to 10 years for its Boden facility, covering 25 MW of critical IT loads, with planned retrofitting for 10,000 NVIDIA GB300 GPUs, building on a long-term relationship with the national energy supplier.
Both expansions followed the same logic: first secure the power relationship and then determine whether the site would run Bitcoin mining or high-performance computing.
Hashprice fell to a record low of $27.89 per PH/s per day in the second quarter, while Bitcoin was down about 50% from its October 2025 peak of almost $124,000, and CoinShares estimates that older generation equipment operating at around $0.05/kWh had negative gross margins.
In Paraguay, Laos, and Finland, operations that combined newer hardware with real energy cost benefits maintained profitability throughout the down cycle, with hash prices at a record low of $27.89 per PH/s per day, making any efficiency benefit deliver outsized returns.
FERC’s move to require all six regional grid operators to justify or reform their interconnection rules for large loads, combined with ERCOT’s increased scrutiny of crypto projects following reliability issues before summer 2026, added costs and timelines for new U.S. buildouts.
Two bottlenecks
The tax-for-liquidity mechanism Levin describes has been a real driver of offshore structuring for institutional clients and the validators that serve them, and Paschall affirmed that the courts will uphold current law.
Sen. Cynthia Lummis, one of the bill’s most consistent advocates in the Senate, will leave office in January 2027, making the period before the August recess the most realistic opportunity for passage.
| Rail infrastructure | Main US bottleneck | What HR 9175 changes | What it doesn’t solve | Forward-looking implication |
|---|---|---|---|---|
| Turn off / validate | Tax timing, securities treatment, custody rules, clarity on licensing | Defers tax on newly earned rewards until sale or disposition | Whether staking is treated as a securities activity in each structure; uncertainty about custody and licensing | Could make US-based validation more viable, especially for institutional customers |
| Bitcoin mining | Energy costs, land management, access to the electricity grid, permits, zoning, uptime | Can reduce tax friction around mined tokens | Does not create cheap power, interconnection capacity, permits or long-term grid security | Miners will continue to diversify into jurisdictions with reliable, scalable power |
| AI/HPC overlap | Competition for locations with electricity, substations, transformers and long-term energy contracts | No direct impact | Does not solve the competition between miners and AI data centers for network capacity | Mining sites with strong power rights become valuable computing infrastructure |
For Bitcoin mining, fiscal clarity is a marginal improvement to a siting decision driven by substations, utility contracts, and permitting queues.
Trump’s “Bitcoin made in America” promise implied that federal intent could produce the physical infrastructure these processes require. The actual geographic expansion of the mining industry, spanning Paraguay, Scandinavia, East Africa and the Gulf, in addition to the US base, is the practical answer to this assumption.